What does allowance for credit losses mean on the CPA exam?
Allowance for credit losses. The amount set aside for receivables not expected to be collected, estimated over the whole expected life of the asset rather than only once a loss is probable.
Defined against ASC 326-20-30-1.
Which CPA exam sections use allowance for credit losses?
Allowance for credit losses appears in the FAR section of the CPA exam.
Related terms
- valuation allowance: The contra account reducing a deferred tax asset to the portion more likely than not to be realized, meaning a likelihood above 50%.
- accounts receivable: Amounts customers owe for goods or services already delivered.
- variable consideration: Any part of a contract price that is not fixed, such as a bonus, a discount or a refund.
- audit sampling: Selecting and evaluating less than 100% of a population of audit relevance so the sample is expected to be representative, giving a reasonable basis for conclusions about the whole population.
- loss contingency: An existing condition involving uncertainty that may produce a loss, resolved by a future event.
- unified credit: The credit that shelters the basic exclusion amount from gift and estate tax.